Macroprudential policy: New challenges

The 2008–2009 financial crisis was unprecedented because of both its size and duration. Some feel it is akin to the 1929 crisis and yet even more severe, especially because of growing financial integration, deregulation, and financial innovations. This crisis foreshadows future financial difficulties, caused especially today by excess liquidity that could lead to a new bubble in financial markets. All the dysfunctions observed on the financial markets over the past ten years have called for a radical renewal of our conception of the regulation of the financial system, in particular by complementing it with a macroprudential approach. Indeed, while the macroprudential view is not new, it has returned to the forefront through the emergence of numerous instruments, at both the macro and micro levels, in response to global financial instability. Over the last decade, policymakers have gained experience in applying macroprudential instruments, in particular in the banking sector, and economic research in the field of financial stability has largely developed. Against this background, it is now time to evaluate the effectiveness of these instruments but also to draw directions for novel fields of research and new macroprudential instruments to tackle new risks. This is the very purpose of this special issue of International Economics. Macroprudential policies are defined as a set of public policies aimed at preventing systemic risks that could compromise a sustainable financing of the national economy. Even with some nuances, this definition frames the action of most macroprudential authorities across the world. Several key aspects of this definition have strong implications in the conduct of such policies (and some are quite subtle!). In the first place, macroprudential policies are used in the plural. This clearly reflects the diversity of the regulatory instruments and sectors targeted by these policies. If they were focused on the banking sector right after the great(This abstract was borrowed from another version of this item.)